Dixons Carphone and Saga

“The FTSE 100 is regaining strength after a very patchy start to June. It nudged up 0.3% in early trading on Thursday to 7,651,” says Russ Mould, Investment Director at AJ Bell.

Dixons Carphone

“There are no surprises in full year results from Dixons Carphone, much to the relief of its shareholders whose patience has been tested on several occasions over the last year.

“If you take a step back and view the company from a broad perspective; it is still making money, the business isn’t highly leveraged, and there is a strong market for people who want to go into a shop and talk to experts about electronic products rather than simply buy one from Amazon just to save a few quid. Therefore it cannot be lumped in with some retailers in a more desperate state such as Debenhams.

“However, Dixons Carphone could clearly be performing a lot better, such as achieving stronger cash flow and finding a way to improve its mobile phone retail business.

“It now has an almost entirely new senior management team who have yet to set out their strategy including the future shape of Carphone Warehouse. Shareholders will have to wait until December to hear the full plans.

“Six months is a long time in the volatile world of retail so Dixons Carphone will have to find ways to keep its ship steady until it is ready to spell out the longer-term direction of the business.”

Saga

“Insurance-to-travel expert Saga had reassured the market with its latest trading statement. Notable achievements include increased marketing work resulting in 30% growth so far this year in new motor policies, which is an acceleration version 17.7% growth reported in April.

“It is also encouraging to see that it has signed up 740,000 individuals for its membership scheme called ‘Possibilities’ versus just over 500,000 in April.

“One of Saga’s strengths is its loyal customer base. Many have multiple products with the company and some even consider themselves to be part of a community – a situation many consumer-facing companies would love to be in.

“Eighty percent of Saga’s group profit is generated by one fifth of its customer base. It has spent a long time understanding how this segment came to become so loyal, so that it can a) try and sell more relevant products to them and b) see which other customers have similar characteristics.

“The Possibilities scheme is part of this broader drive to have greater engagement with its customers, which seems a very sensible strategy.

“Many companies fail to appreciate that if they show more interest in their customers and listen to what they want, there could be a greater chance of them staying customers for longer. It’s good to see Saga going beyond the basics of doing business.”

These articles are for information purposes only and are not a personal recommendation or advice.